How to Know if Your Property Will Make a Good Rental
Thinking of renting out your property but aren’t sure if it’s going to be profitable for you? Here’s how to know if your property will make a good rental.
Rental properties are one of the best ways to build long-term wealth.
For many potential investors, the problem comes down to finding a good rental property. The good news is picking out a winner requires just a little research.
Keep reading to see the seven factors that can make or break a rental property’s return on investment (ROI).
We know, we know, of course you want an in-demand property. The trick is finding the factors that show an area is hot.
One of the best indicators that an area is ripe for rental investments is a growing population and hot real estate market. This shows that people want to live in an area and they’re willing to pay a premium to do it.
2. Area Job Opportunities
This one is huge. Properties in an area with hot job opportunities will always be in demand.
The West coast has been growing exponentially for the last few decades because of this. Silicon Valley, San Francisco and Seattle have all seen explosive growth from the high-paying software and startup jobs available.
3. Management Options
Unless you plan to treat your rental property as a full time job you’re going to need to hire a property management company. Before you pick out a good rental to buy, find out what property management companies are in the area.
There are several traits a good property management company should have. These include a fair and transparent fee structure, up to date tenant procurement/management technology, experience and an established positive reputation.
4. Crime Statistics
Let’s face it, no one wants to live in an area where they don’t feel safe. Make sure you look up the local crime statistics before you ever visit a potential property.
There can be benefits to buying a property early in an up and coming area. Usually, though, tenants prefer to live in a low crime area with a good reputation.
5. Area Amenities
If your property is out in the middle of nowhere it limits tenants. People love to live near good restaurants, grocery stores, and green spaces.
Millennials especially prefer properties that have walkability. Being able to take your dog out for a walk to the local market to buy groceries for dinner is a major selling point for a good rental.
6. School Districts
When a family with children looks for a home, one of the very first things they do is check out school districts. An in-demand school district is one of the best ways to attract families.
There are tons of easy-to-use tools that show school rankings. These usually include factors like student to teacher ratio, AP classes offered and other useful metrics like test scores.
7. Maintenance Costs of a Good Rental Property
Costs can make or break a rental properties profitability. When looking at potential properties always ask for maintenance records and average costs.
Older properties can often conceal ongoing maintenance issues. Always have a licensed home inspector go over potential properties with a fine-toothed comb.
Nothing kills ROI like a major repair soon after you purchase a property.
Always Take the Long View
Investing in rental properties should always be viewed as a long-term investment. Remember that you aren’t just getting rental income from your property, you’re also accumulating equity.
If you’re interested in adding rental properties to your portfolio, check out the full-service property management options we offer.